Product investment high on the agenda as joinery sector shows cautious...

Product investment high on the agenda as joinery sector shows cautious optimism after mixed Q1 results

7 June 2017

The British Woodworking Federation’s Joinery State of Trade Survey Q1 2017 has indicated continuing investment in product improvement and cautious optimism over sales, despite a mixed quarter for manufacturers. Inflationary pressures such as wages and the impact of exchange rates on raw material costs continue to act as a constraint on business.

BWF Chief Executive Iain McIlwee commented on the state of the joinery industry:

“I think cautious optimism best describes the mood at the moment - prospects for the second quarter are good with over a third anticipating growth of over 5% and just 12% expecting to step back. As we look into next year it becomes more difficult to predict, especially given the current political uncertainty, but things look relatively stable. Q1 has been good for some, but not all, with a balance of only 14% reporting an increase in sales volumes despite 31% of members seeing their market increase by over 5%. Delving further into the data, stair manufacturers have had a good quarter, whereas those manufacturing internal and external doors have seen mixed results.

“In terms of tangible impact of the EU Referendum result, it is still currency and the knock on effect on material and component prices that stands out – 90% of members reported increases in unit cost price over the past 12 months and none saw a reduction. Margins are tight and we need to see a fair risk reward ratio across the construction supply chain if the sector is to thrive. This is an area where the supply chain needs to step-up. In other material sectors there is far better alignment to support the manufacturer in selling on value – for timber, the fragmentation upstream means there is less support and this makes it more difficult for the SME timber manufacturers."

Key points from the BWF Joinery State of Trade Survey Q1 2017 include:

- A balance of 14% of joinery companies reported an increase in sales volumes for Q1 2017 from the previous quarter. This follows on from 26% of joinery companies reporting an increase in sales volumes in Q4 2016 from Q3 2016.

- Manufacturers felt that sales volumes would improve in the next quarter, with a balance of 34% predicting an increase for Q2 2017, and a balance of 32% predicting an increase over the next year.

- 29% of companies reported a current order book of future work extending beyond 3 months – up 10% from the previous quarter - with 44% saying that their order book extended from between 1 and 3 months.

- Demand was listed as the most likely constraint on output over the next year by 41% of respondents. Capacity and labour availability came next, each with 15% of respondents feeling that they were most likely to constrain output. Raw material prices had become the main factor for 10%.

- 33% of respondents on balance reported increasing their labour force in the last year, with 24% of respondents anticipating an increased labour force over the next year.

- Raw material costs were noted as the main inflationary factor for unit costs for 95% of respondents, with wages/salaries increases pushing up unit costs for 77% of respondents on balance.

- Exchange rates were a factor in inflating unit costs for 63% of respondents.

- 65% of respondents on balance reported an inflationary impact in unit costs through fuel costs.

- Investment in product improvement had been increased by 71% of companies on balance over the past year, with a balance of 70% to boost investment over the next year.

- Investment in manufacturing equipment spending had been increased by 49% of companies on balance over the past year, with a balance of 40% to boost investment over the next year.

As a benefit of membership, British Woodworking Federation members can view the full BWF State of Trade Survey plus the latest economic reports produced by the Construction Products Association industry forecasting team.

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